Bah Humbug! You’re A Mean One, Uncle Sam

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

March 14, 2014 - 15:39 — CAGW Staff

The Christmas season may be long departed, but the Grinch (in the form of Uncle Sam) is working hard to dampen the magic of the holiday season by stealing the gift of a free market system right out from under the noses of U.S. taxpayers.

H.R. 2642, the 2014 FARRM Bill passed by the House and Senate and signed into law by President Obama on February 7, 2014 has one very unwelcome stocking stuffer included within its 949 pages: a fresh commodity check-off program on live Christmas trees. It turns out that commodity check-off programs operate like hidden taxes and will add to the price of fresh Christmas trees in 2014 and every year thereafter unless it is repealed.

The idea was first introduced in 2009, when the National Christmas Tree Association made three attempts to create a voluntary payment system for its own members. When that plan failed, the Christmas tree industry called in the government to do its bidding. On November 8, 2011, the Obama administration issued an alarmingly unpopular final rule that approved a new program to help promote Christmas trees by imposing a 15 cent “assessment” on fresh cut Christmas trees.

That announcement was met with strong opposition from free-market groups and lawmakers, and the Administration was forced to delay the rule; however, the administration tasked the U.S. Department of Agriculture with creating a commodity check-off program for marketing and research purposes that would “enhance and promote the image of Christmas trees and the Christmas tree industry in the United States.” The 15-cent charge on every live tree sold would fund a Christmas Tree Promotion Board, consisting of industry members chosen by the Secretary of Agriculture, which would determine alternative ways to promote live Christmas tree sales.

The 2014 FARRM Bill also established a new “Organic Check-off Program,” as an amendment to the USDA’s Federal Research and Promotion Program. Because the Commodity Promotion Act of 1996 had previously exempted certain organic commodity producers, the check-off program was included in the final bill over the vigorous objections of a significant number of both organic farmers and organizations such as the National Organic Standards Board (NOSB). Former NOSB chairman Jim Riddle, raised concerns over the creation of a USDA-appointed Organic Research and Promotion Board stating, “It takes a lot of money to support the bureaucracy itself, and the appointment process is easily manipulated by those with money and political influence.”

Organic farmers point to recent research that indicates that many of the current check-off programs have become captive of the largest, most well-heeled members of the commodity community, have become less and less transparent and accountable to members, and that the marketing campaigns that members are forced to fund have not proven beneficial to all who are forced to ante up. The Christmas tree commodity check-off program could end up being no different.

Furthermore, in the absence of the free market, commodity check-off programs tend to breed competition of a different kind; that is, groups competing to have the federal government step in to mandate commodity check-off programs for their favored commodity. In that environment, the wealthiest and most politically well-connected commodity lobbies tend to dominate the landscape.

According to the American Christmas Tree Association, only 20 percent of trees sold in 2012 were live. Artificial trees pose fewer fire risks than the fresh kind and consumers also tend to hang on to their artificial trees for at least seven years, which makes them an attractive option for environmentally-conscious people. Artificial tree sales will undoubtedly continue to impinge on the sale of real evergreens for years to come.

Since the implementation of the Commodity, Promotion, Research and Information Act of 1996, Congress has stated that commodity check-off programs are vital to the welfare of the agricultural economy of the nation in order to stabilize and strengthen the marketplace. Accordingly, Congress has passed various laws that authorize and implement commodity check-off and promotional programs in order protect market share and stimulate sales of American commodities.

However, the USDA Office of Inspector General (OIG) has released several reports detailing sub-par oversight standards of the 19 check-off programs that were in existence prior to the passage of the farm bill. In March, 2012, the OIG found that the Agricultural Marketing Service (AMS), which is the agency charged with overseeing the activities of the commodity marketing boards (which in turn expend the check-off program funds), needed to improve its oversight controls.” According to the OIG, “AMS’ oversight policies were unclear regarding the agency’s roles and responsibilities and the specific oversight procedures AMS staff must perform. In addition, staff did not always enforce the agency’s guidelines.

As a result, AMS’ staff misinterpreted and inconsistently applied those policies when overseeing the activities and operations of the various boards. This condition increases the risk that funds could be misused by boards.” In January, 2014, the OIG again reviewed the AMS’s oversight procedures, this time with regard to how the beef check-off funds are managed, and found that deficiencies in its procedures “resulted in agency officials having reduced assurance that beef check-off funds were collected, distributed, and expended” in accordance with the law.

Though the 15 cents will hardly be a bank-breaker, the costs will definitely be passed on to consumers. However, this is not about the money, it is about the proper role of government and the free market. It is no secret that politicians love power and control, and make no mistake, they are after both. For years, many Washington lawmakers have done their best to corrupt the proper function of the free market system, not because it doesn’t work, but because a free market tends to be unwieldy and resistant to the political manipulation of politicians.

At the heart of the opposition to these programs is the premise that federally-mandated programs are a violation of economic freedom. Although Congress has claimed that check-off programs were “neither designed nor intended to prohibit or restrict individual advertising or promotion,” a commodity supplier with a limited marketing budget may have no choice but to restrict its own advertising as a result of having to pay mandatory check-off assessments. The program’s ultimate effect on different check-off program participants may also vary based on various market conditions.

Several arguments have been raised questioning the constitutionality of mandatory check-off programs. Two court cases over the issue addressed the argument over whether check-off programs are compelled speech (by the government). Both went to the U.S. Supreme Court. In the case of Glickman v. Wileman Bros. & Elliot, Inc., the Court ruled that check-off programs that required commodity producers to ante up funds to be used for promotional programs and generic advertising did not violate a producers’ right to free speech under the First Amendment.

However, in the case of United States v. United Foods, Inc., the Court ruled that such programs were unconstitutional because the assessments collected in that case were used almost exclusively to fund generic advertising, instead of a wider range of activities. Another argument, the compelled association, or mandatory participation argument, has yet to be fully addressed by the Court.

Commodity check-off programs continue to stoke dissatisfaction among a growing segment of commodity producers, foment concern about the inequitable benefits for those forced to pay the fees, as well as management of the check-off funds. The Christmas tree check-off program will artificially protect the fresh Christmas tree industry from consumer trends, which have moved toward artificial trees, and establish a new corporate welfare bureaucracy, another reminder of the failure of the most recent farm bill to evolve away from the command-and-control structure that has plagued the nation’s agriculture system for decades.

As the Heritage Foundation’s budget expert Daren Bakst wrote, “A 15-cent tax may not seem like much, however, taxes are a death by a thousand cuts, and one of those cuts shouldn’t come from the Christmas tree.”

Regardless of the product, a tax is still a tax, and ultimately, taxpayers will end up paying for someone else’s business subsidy. Check-off programs disrupt competition, corrupt the natural cycle of supply and demand, and lead to a more bloated bureaucracy. Uncle Sam should instead allow the power of the free market to remain in the hands of consumers; Congress should have left the idea of a Christmas tree check-off program in the same place that people put their live Christmas trees each January: at the curb.